Model Closing Opinion Letter (Annotated) - American Bar Association

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2 Model Closing Opinion Letter (Annotated) (b) Opinions relating to incorporation, organization, existence, and good standing do not cover licenses, registrations, or other governmental or third-party approvals that might be required prior to commencement of a particular type of business but that were not a condition to incorporation. If such matters are to be covered in an Opinion Letter, they should be covered by a separate Opinion on the applicability of and compliance with those licensing requirements. C. Qualification in Principal Foreign State 1C. The Company is duly qualified as a foreign corporation and is in good standing in the (Commonwealth of Pennsylvania) [if Borrower is a Delaware corporation] (State of ___) [if Borrower is a Pennsylvania corporation]. Note: (a) ABA Guideline 4.1 states that this Opinion should normally not be requested on a cost-justified basis because it involves extensive factual inquiry and a review of the law of jurisdictions where the Opinion Giver would not reasonably be expected to have expertise. See also TriBar Report § 6.1.6. The Opinion Giver may have an experienced corporate service company obtain the certificates customarily obtained by it in the particular states involved based upon a factual certificate from the client, and then, if an Opinion is required, rely on those certificates without further inquiry. Id. The Pennsylvania Opinion Report does not deal with an Opinion as to qualification in a foreign state. (b) Sometimes the Opinion that the Company is qualified in all states where necessary was limited to states where the failure to be qualified would not have a “material adverse affect.” However, an Opinion as to “material adverse effect” is based in large part on a financial judgment, and ABA Guideline 1.4 states that an Opinion requiring interpretation of financial statements should not be requested; in addition, ABA Guideline 3.2 discourages the use of the “materiality” concept in an Opinion Letter, unless objectively defined. ABA Guideline 4.1 indicates that qualification and good standing certificates (and tax certificates where available) from public officials, without a legal Opinion, should be sufficient. The TriBar Report, section 6.1.6, is in accord. (c) At most, the Legal Opinion Committee believes that any Opinion on foreign qualification should be limited to named states (following the format of Opinion paragraph 1C), based on the Public Authority Documents referred to in note (a) thereto. 66
Opinion Paragraphs (d) As to “good standing” in addition to “qualification,” see TriBar Report § 6.1.6: “Like the opinion on the Company’s good standing in its state of incorporation, good standing in this context customarily is understood to have whatever meaning is ascribed to it in the certificates on which the opinion preparers are relying.” If a tax certificate is obtained that shows any tax delinquency, a “clean” opinion as to good standing can still be given. However, if the delinquency would give the state the power to revoke corporate qualification, the Opinion Giver may want to call attention to that fact. 2. Corporate Power 2. The Company has the corporate power [and authority] to execute, deliver and perform [all of its obligations under] each of the Loan Documents. Note: (a) A Corporate Power Opinion relating to the Transaction Documents means that the Company has the power to take the specified actions under its charter and bylaws and applicable corporation law. TriBar Report § 6.3. The phrases “corporate power” and “corporate power and authority” are understood to have the same meaning. The phrase “full power” has no generally accepted meaning and its use should be avoided. Id., § 6.3 n.138. In considering the Corporate Power Opinion, the Opinion Giver should consider the matters set forth in Part I, Section 2 of the Pa.Op.Report. (b) An Opinion is sometimes requested as to the client’s corporate power “to carry on its business as it is now being conducted”—i.e., that the nature of its business is not ultra vires. Such an Opinion is not included in the illustrative opinion letters in the TriBar Report, nor discussed in the text of that Report. The Pennsylvania Opinion Report, however, contemplates the giving of such an Opinion (see Pa.Op.Report Part I, Opinion 3), and recommends in paragraph 3.5 obtaining a certificate from an official of the corporation describing the corporation’s business, or defining the corporation’s business through reference to descriptions in public documents such as SEC Form 10-K. 67
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Model Closing Opinion Letter (Annotated) - American Bar Association

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